Sunday, 17 May 2020

Former Executive Director of Standard Chartered Bank, Mr
Alex Mould is urging government to discontinue the decision to use National
Board for Small Scale Industries (NBSSI) to disburse the GHS600million soft
Loan stimulus package for Small Medium Enterprises (SMEs).

The soft loans which is under the Coronavirus Alleviation
Programme (CAP) is intended to mitigate the effects of COVID-19 on the
operations SMEs.

The government this week, announced NBSSI will have access to
the fund this month and begin with the disbursement to SMEs in the country. But the Energy and Finance Expert, Mr Mould believes NBSSI
is not qualified to disburse the loans.

According to him, unlike financial institutions that are
regulated, have credit underwriting standards and credit approval procedures,
"the NBSSI is a bureaucratic institution controlled by politicians.

"Financial
institutions should be the channel for disbursing the GHS600m earmarked for the
SMEs under the CAP, or it could become a political slush fund otherwise"
the immediate past Chief Executive of Ghana National Petroleum Corporation
stressed.

Read full statement below:

NBSSI NOT QUALIFIED TO DISBURSE SMEs FUND UNDER CAP

Government should be crystal clear on the terms of GHS600m
loan fund allocated to SMEs under Coronavirus Alleviation Programme.

The National Board for Small Scale Industries (NBSSI) will,
from this month, have access to government’s GHS 600 million soft loan stimulus
package for SMEs.

The loan, which comes with a one-year moratorium and a
two-year repayment period is intended to mitigate the effects of COVID-19 on
the operations of micro, small and medium-sized businesses.

I want to highlight some of the potential challenges with
this model.

Firstly, I can emphatically state the NBSSI is not qualified
to disburse loans. Unlike Financial institutions that are regulated, have credit underwriting standards and credit
approval procedures, the NBSSI is a bureaucratic institution controlled by
politicians.

What safeguards has the NBSSI put in place to ensure
that the funds disbursed are used for
the approved purpose?

Other questions that require immediate clarity are:

1. What exactly is the qualifying criteria the NBSSI will
outline for funds eligibility; in addition to the basic guidelines outlined by the Ministry of
Finance?

2. What precisely can these funds be used for?: for example,
are these eligible:

- workers salaries and statutory expenses

- interest repayments
on loans to banks

- rent payments

- utility payments

- other working capital needs

Financial institutions should be the channel for disbursing
the GHS600m earmarked for the SMEs under CAP, or it could become a political
slush fund otherwise.

Clear risk sharing allocation protocols must be agreed
between Government and Financial institutions.

Additionally, stakeholder engagement e.g. trade
associations, Association of small scale induatries (ASSI) etc is necessary to
help determine the needs of SMEs amid the COVID-19 pandemic.

We should all remember this is NOT free money and approval
criteria needs to be obvious and transparent.